Buying a house is one of the largest purchases many people will make over the course of their lives. And a mortgage will be one of the biggest loans a person will take out.
Monthly mortgage payments are generally calculated using a formula that combines the principal (the amount of money borrowed in the loan), the annual interest rate for the loan (what the lender charges you to borrow that money), and the term of the loan (the number of years it will take to pay the mortgage off).
The formula works backwards from the idea that each month, a
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